While buying a car, people tend to overlook factors like running and maintenance costs, which recur in the form of service, fuel expenses and yearly insurance premiums. Prior to purchasing a car, a lot of ground work needs to be done.
Obviously, you tend to look at various models available in the market that fit your budget. But, besides that, you should go through reviews in papers, magazines or on internet, and jot down features you are not ready to compromise on. Consulting peers is also a good idea as you could learn a lot from others’ experience. After this, you should make a shortlist from which to take a final decision.
Budgeting and self-assessment
Determining your budget is the starting point. Once that is done, you need to decide whether you want to go in for an outright purchase or partial finance, that is, take a car loan. In the former case, ensure that you don’t exhaust your entire savings and end up being cash-strapped. If you do this, you could end up borrowing at much steeper rates in the event of an emergency. Remember, it’s never advisable to dip into your ?emergency fund?. Evaluate
the short-listed models and strike out options that exceed your budget. Always stick to the budget.
Loan vs company provided car
Taking a loan to purchase a car is not a bad idea, but it will entail a regular outflow in form of EMIs, affecting your disposable income. If your company provides loan at concessional rates, it is advisable to go in for this option. However, if you are planning to switch jobs anytime soon, this might not be a good idea, as you would need to close the loan.
You could also look at the option of a company provided car. Many companies provide this option to employees after a certain number of years in service. These are necessarily taxable as perquisites in the hand of the individual based on the usage, i.e., whether it is used for official or private use, or both. Nonetheless, this helps save tax and is a better option than going in for a loan.
Once you have zeroed in on a car model, consult dealers and obtain quotes from them. Though this will not help you significantly reduce cost, it will bring down the overall cost by a certain percentage.
Once you have bought a car, various costs will occur at regular intervals, such as servicing cost, wear and tear cost, etc., which have to be borne for optimum performance. Rising fuel prices will burn a hole in the pocket if these are not budgeted for. Pay your car insurance premium on time and ensure the policy does not lapse.
On the money:
Determining your budget is the starting point. Once that is done, you need to decide whether you want to go in for an outright purchase or partial finance, that is, take a car loan. It?s not advisable to dip into your emergency fund to buy a car
Taking a loan to purchase a car is not a bad idea, but it will entail a regular outflow in form of EMIs, affecting your disposable income. If your company provides loan at concessional rates, you can go in for this option
You could also consider a company provided car. Many companies provide this option to employees after a certain number of years in service
The writer is CEO & Founder, Right Horizons